Rachel Reeves is reportedly planning to cancel a planned fuel duty rise this week, because nothing says "helping with the cost of living" like not making things more expensive. The chancellor will announce she will not implement the 1p increase scheduled for September, government sources said, and she may even cancel the entire 5p rise that was set to phase in over six months.
The move is part of a broader strategy to mitigate inflation exacerbated by the war in Iran. Reeves is expected to unveil the plan to the Commons on Thursday, presumably with a straight face.
A government spokesperson, who declined to comment on the specifics of the plan first reported by the Sun on Sunday, did offer this gem: "The government is determined to keep costs down for motorists paying more because of the war in Iran. That’s why we’ve extended the 5p fuel duty cut twice, until September. While the chancellor will continue to monitor the situation, as the chancellor has set out, a rapid de-escalation in the Middle East remains the best way to keep pump prices low."
Reeves had previously announced at the last budget that she would freeze fuel duty for nine months but end the temporary 5p cut - first introduced by Rishi Sunak in 2022 after Russia’s invasion of Ukraine - starting this September. Now she's under pressure to extend it, at an estimated cost of £2.4bn a year. Richard Walker, executive chair of Iceland supermarket and the government's cost of living champion, recently opined on BBC Radio 4’s Today programme: "The 5p fuel duty cut that you allude to is an interesting one. That’s going to expire in September. I think, given where we are, we do need to be thinking and talking about extending it or enlarging it."
Reeves has been exploring other options to keep prices low, including freezing private sector rents and subsidising some energy bills. However, officials say a rent freeze is off the table, and an energy bill relief package will likely wait until later in the year, since the price cap is fixed until the end of June. Because winter, when energy usage is highest, is apparently the perfect time to announce relief.
She has already allocated £50m to subsidise heating oil for families who rely on it, many in rural areas, particularly Northern Ireland. The announcement comes amid huge uncertainty for the government, with Greater Manchester mayor Andy Burnham fighting the Makerfield byelection on a promise to challenge Keir Starmer for Labour leadership. Burnham, who has made affordability his platform, told an event in Manchester: "Forty years of neoliberalism … created an economy that didn’t work for most working people. It led to people paying over the odds for the daily basics - energy, housing, water, transport."